SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): January 25, 2011
IMAGE METRICS,
INC.
(Exact
Name of Registrant as Specified in Charter)
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Nevada
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333-123092
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20-1719023
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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1918
Main Street, 2nd Floor
Santa
Monica, California
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90405
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (310) 656-6551
(Former Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR
240.13e-4(c))
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CURRENT
REPORT ON FORM 8-K
IMAGE
METRICS, INC.
January
25, 2010
Item 4.02. Non-Reliance on
Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review.
On
January 25, 2011, our Board of Directors concluded that our previously issued
financial statements as of and for the three and six-month periods ended March
31, 2010, and the three and nine-month periods ended June 30, 2010, should no
longer be relied upon as a result of us undervaluing the liability associated
with warrants outstanding to purchase our common stock. We issued
warrants to investors who participated in our private offerings in March 2010,
to the brokers who assisted in raising funds for us in the private offerings,
and to lenders who provided us bridge financing during the three months ended
June 30, 2010 and March 31, 2010. The warrants allow the holders to
purchase shares of our common stock at prices that range between $1.20 and
$1.50. The warrants contained anti-dilution provisions that in the
event we issued shares of our common stock at a price below the then current
adjustment trigger price, which as of March 31 and June 30, 2010 was $1.00, the
warrant exercise price would be adjusted downward.
We
determine the value of the liability associated with our warrants by utilizing
the Black-Scholes-Merton option pricing model. One of the inputs of
the Black-Scholes-Merton model is the price of our common
stock. Previously, we determined the fair value of our common stock
by first determining the enterprise value of Image Metrics. We then
used a third party valuation firm to allocate the enterprise value between our
common and preferred stock. Previously, we did not use the market
price of our common stock as quoted on the OTC Bulletin Board, as we concluded
the quoted price was not a fair representation of our unregistered common
shares.
On
January 25, 2011, we concluded that we incorrectly applied the provisions of
FASB Accounting Standards Codification No. 820, “Fair Value Measurements and
Disclosures” (“ASC 820”). ASC 820 requires us to use the quoted
market price of our common stock on the OTC Bulletin Board as the input for the
fair value of our common stock in the Black-Scholes-Merton
model. Additionally, we are evaluating whether the use of a Monte
Carlo simulation is more appropriate in determining the fair value of the
warrant liability. As a result of this correction, we will need to
make a material adjustment to the the value of our warrant
liability and materially increase our net loss for
the periods ended March 31, 2010 and June 30, 2010.
In
accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the
Company’s management has been assessing the effectiveness of the Company’s
internal controls over financial reporting and disclosure controls. Based on
this assessment, the Company expects to report a material weakness in the
Company’s internal controls over financial reporting, and, therefore, conclude
that internal controls over financial reporting as of March 31, 2010 and June
30, 2010 are not effective.
Accordingly,
we will restate our financial statements as of and for the three and six months
ended March 31, 2010, and as of and for three and nine months ended June 30,
2010, by disclosing the effect of these adjustments in an amended Form 10-Q for
the quarterly periods ended March 31, 2010 and June 30, 2010. We
anticipate finalizing these impacts and to file the amended reports within the
next two business days. Although we do not foresee any issue, we
cannot issue a guarantee that we will file the amended reports within two
business days.
The Audit
Committee of our Board of Directors authorized our Chief Financial Officer to
discuss the foregoing items with our independent registered public accounting
firm, which agreed that our quarterly financial statements could not be relied
upon and needed to be restated as described above.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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Date:
January 28, 2011
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IMAGE
METRICS, INC.
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By:
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/s/
Ron Ryder
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Ron
Ryder
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Chief
Financial Officer
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